|Summary:||Petrochemicals: FPG core earnings set new high in 2017
Within the group, FCFC and FPC both set new earnings highs in 2017: FPG core members posted an aggregate op. profit of NT$49.97bn for 4Q17 and NT$182.37bn for 2017 (+25% YoY). Combined net profit of the core members reached an all-time high of NT$237.25bn (+14.2% YoY). In addition to healthy market demand, we see two key factors that will underpin lofty petrochemical prices in 2018. First, we estimate WTI crude oil prices will average US$55/barrel in 2018, or about US$4-5 higher than in 2017. Second, we believe China’s crackdown on heavily polluting industries will cap new supply from China. We see a positive 2018 earnings outlook for FPG.
We reiterate our Buy calls on the following:
FPC (1301 TT), TP at NT$106 (1.9x 2018 P/B), 4% upside.
FCFC (1326 TT, TP at NT$119 (1.9x 2018 P/B), 10% upside.
NPC (1303 TT), TP at NT$87 (1.9 X 2018 P/B), 7% upside.